Council bosses are considering spending an extra £11 million on residential care services – to ensure private care home staff are paid decent wages, it has emerged.

Under the proposal, Labour-run Birmingham City Council would demand that all homes receiving authority-funded residents must pay cleaners, carers and other staff at least £7.45 per hour – the nationally-recognised living wage. But the authority’s cabinet member for contracts, Coun Stewart Stacey, warned the extra cost of introducing the living wage could not simply be passed to care homes as budgets were already stretched.

“There is no more fat to sweat,” he said. “If we want to raise wage levels in that sector, we are going to have to pay for it.”

The £7.45 hourly rate is considered to be the minimum needed by a full-time worker to pay for basic living costs.

But the council is concerned that many care home staff receive only the national minimum wage of £6.19 per hour, leaving them needing benefits to make ends meet.

Coun Stacey said he would prefer not to have someone struggling on a minimum wage, overworked and underpaid, caring for him in old age.

The move is part of a new council business charter, under which the authority will urge suppliers taking its contracts to pay decent wages, create jobs locally and act in a socially responsible way.

But it does not yet include social care.

The cabinet stopped short of introducing the measure immediately, saying it would be considered during next year’s budget-setting process.

The living wage policy won cross-party support in principle.

But Tory opposition leader Mike Whitby warned some firms could go out of business or cut jobs if forced to increase pay levels under threat of losing contracts.

The council adopted the living wage for all directly-employed staff last summer.